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Thank you reporting.
It's the numbers a better expect The number socks up almost five percent, although it's still down about three percent a year to date, but maybe a little bit of turnaround there working through the inventory is Some smart folks have told me about the niket you story. One of those is Punam Goyle. She's a senior US e commerce and retail analysts for Bloomberg Intelligence. Put them, is the turnaround at Nike?
Is it kind of turning? Is it working?
It's working. I think yesterday was the first sign that Nike is able to pick up momentum. Sales on a reported basis, we're up a one percent. Inventories we're down two percent. This is exactly what we wanted to see. We wanted to see inventories aligned with sales. So while the work isn't done and it's not over and it's not a straight lineup, we do see momentum building. What they're doing is working. The new products, the innovation, the
focus on wholesale, it's all coming together. There are still some pitfalls. China is still sluggish, and we'll need to wait and see what happens there as well as with its Converse brand.
Okay, so China's definitely an issue. Converse is work in progress. When I look at the revenue line, the top line, what I see is direct revenue fell four percent, wholesale revenue rose seven percent. Just break that down for us in terms of what that means direct revenue versus wholesale revenue.
Sure, so direct revenue composers of stores which were actually up one percent. So that shows us that the innovation and the new products which are flowing through their own stores is working. What made the DTC revenue go down four percent was that digital was down twelve percent. No surprise here. This is where they're clearing all that excess inventory. So this channel will be pressured for a couple of quarters. Still,
wholesale up seven percent a great, great number. I mean, it just shows that coming back into partnerships with foult Locker in a more meaningful way, getting on Amazon dot Com all these efforts are paying off, and they're where the customer is. They're gaining their shelf space back and the customers are responding favorably.
You know that Nike brand is such a powerful and powerful brand.
I think of it like Coca Cola or Apple. It's so powerful.
Yet some of those American brands in China under pressure, and I'm wondering, just with the geopolitics, is Nike a brand where that might be feeling some anti American sentiment from consumers.
So that has happened in the past, there have been boycotts against US American brands. We don't think that's the issue yet from what we're hearing, but we do think that the issue is more product at Nike in China, so they do need to ramp a product and they do have a lot of access inventory there, more so than they do in the US today. So that's also a work in progress that they need to get through.
Let's talk about profitability.
Margins declined due to higher discounts and then also the higher tariffs in North America. I look at gross margin forty two point two percent last year. At this time it was more than forty five percent. Now the forty two point two percent was better than estimated. How long is it going to take for Nike to turn that around.
I think we have quite some time to get back up to historical margins. In fact, you know, on the call yesterday they said that they do still aspire to reach double digit EBIT margin. EBIT margins in the quarter that they just reported was only at seven point one percent, So that's a long runway. We don't think it's any time soon. And the hit from tariffs is building, not reducing.
They had expected a billion dollars the last time they spoke to us, and yesterday that one to one point five billion dollars and access costs from tariffs.
How much are they passing along to the retailer versus taking that in their margin, Because I mean, Nike is probably just a great example of how compans are trying to deal.
With the tariffs.
Yes, I think they're doing this actually very smartly. They're not increasing prices on products that are under one hundred dollars, but they are taking prices up on sneakers that are above that price point. So if you think about moving prices up, it's very easy to say the price of milk went up from three dollars to three point fifty.
But when you're looking at a pair of sneakers, especially a new launch, you have no comparison, So you can go ahead and price up your new innovation and the customer may not even recognize that there was a material price increase, and that customer has a little bit more flexibility to stretch their wallet's at that price point.
Punam, if you are heading up on Holdings or Adidas or Sketchers or you know, any of the Hoka what would you be thinking looking at this set of results.
So Sketchers, I think is in a different league than Nike. It's it's a little bit different. It's a value play, and I think they don't compete directly like an Adidas or an On or a Hokah would with them. Adidas is doing really well on its franchise lifestyle shoes, and I think Nike, what you heard yesterday, was doing well in performance. So two still very distinct categories. Though for On and hok I think it's a little bit of a different story because what I heard from that call
yesterday was that running was back on. It's doing phenomenally well, and that is where hogaying on both took share from Nike, so I would be just, you know, a little concerned and just make sure that I keep my game on when it comes to innovation, because at the end of the day, product is what's going to drive how sales. Moment we'll go moving forward.
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Another IPO priced here Neptune Flood Insurance NP is the ticker and joining us from.
The New York stock Et chains forst Trevor Burgess. He's the CEO.
Trevor, thanks so much for joining us, your congratulations on the ipo is a price at twenty dollars.
I'm looking at the Bloomberg terminal now. Weve got a bid of.
Twenty two and a half in the ask of twenty two and three quarters, so maybe they'll finally get this thing opened. If I were running your deal, Trevor, I would have had this open at ten thirty. No later, Trevor, talk to us about your business model flood insurance. You guys have exposure to Florida. Nobody provides insurance in Florida. What's your business model?
Yeah, So Neptune is an artificial intelligence company that does a really good job at underwriting flood risk for global insurance and reinsurance company. So we don't actually take the risk. We build technology that does a really good job at analyzing that risk and making sure it's some thing that
the global insurance markets want to take on. Which makes us the largest competitor to the National Flood Insurance Program, which is the federal government's program, which was the only way to buy flood insurance for a long time until Neptune came along. Happens to be that the government's closed today.
So Neptune is the only game in town right now, which is exciting for us, obviously, because we want to help those thirteen hundred consumers who are trying to buy their house today and who need flood insurance.
We're the solution.
So, Trevor, let me ask you.
There's been a lot of complaints about the federal flood insurance program.
What is broken with it?
Why is it something that people are not on board with or people can't get when they need.
Well.
There are a couple of ways to look at the NFIPECE problems, but the biggest one is that they've lost nearly forty billion dollars in their history. They're paying millions of dollars a day in debt payments to the US Treasury. So it's just an unsustainable program and it doesn't offer a product that consumers want. They only go up to two hundred and fifty thousand dollars of coverage on your house. Neptune offers up to seven million.
Dollars of coverage. We'll also cover.
Your Airbnb or your hotel if you're flooded out of your room. If you are with the NFIP, you're just out of luck. If you have a flooding, there's no money for that hotel.
So who are your clients, Trevor. Are they the insurance companies and reinsurans themselves.
We get to have two clients.
We serve those global insurans and reinsurans who are looking to put money to work in the flood insurance space. And importantly, our customer is the American homeowner and business owner. We provide residential and commercial policies to protect your home. We compete with the NFIP every day that they're open. Today they happen to be closed fair enough.
Fair enough in terms of which states are most affected, Paul mentioned obviously Flora, But is there, I mean, floods.
Seem to happen.
Yes, flood seemed to happen to every state, including those that are inland. Is there any area in the country that is more relatively shielded from flood risk?
Not really. If it can rain where you live, then it can flood. And we saw that in the month of July. They were major floods in twenty three states in this nation. That means that everyone is really at risk and needs to have flood insurance. But unfortunately, because of the government's program, only four percent of Americans have coverage today. Neptune is trying to change that. We want to get many, many more Americans protected from this most
dangerous peril. You've seen these hurricanes when they hit, the tragic flooding that took place in North Carolina and in Texas recently. Neptune is here to make sure all of those homes are protected.
Trevor is flooding.
Is that a risk that is going up in frequency and in damage? And if so, why is it happen.
It's happening.
The answer is yes, and it's happening because the climate is changing. It's undeniable that the sea level in Key West, Florida is nearly a foot higher than when I was born. The temperature in the Gulf and in the Atlantic is warmer than it was ten years ago. That added heat is energy, and that leads to more frequent and severe storms.
So what's the growth story for Neptune? Is it more markets? Is it more policies? Is you driving rates higher? How are you guys pulling those lovers growth?
The growth story for Neptune is helping educate the American consumer that their homeowner's policy does not cover the risk of flooding and that they need to buy a separate policy to protect.
Their most valuable asset.
If we can just help educate people on that fact, Neptune's going to do a great job at growing.
We should mention that Neptune is going public after a bunch of specialty insurance companies have gone public this year, Accelerant Holdings, Aspen Insurance, American integrity insurance, slide insurance. What do you think it is about the current environment that makes it so welcoming for insurance companies to tap the public market.
It's nice to have the market open, and it's nice that pricing and insurance makes sense. We want to make sure that that consumer is finding value, that the agent is doing well, that Neptune's making money, and it's sustainable for the global.
Insurance and reinsurance community.
I think we have some good equilibrium in the industry right now, and that's why you're seeing so many companies come to market.
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Again, we've been talking a lot about AISO is everybody in the marketplace really for the last two or three years, and now you've been looking for derivative plays, and a lot of the deliverative plays have focused on who's going to power all these data centers, and that focuses on energy fossil fuel, energy, new energy, and even including nuclear energy. So everything seems to be on the table as these data center providers think about how they're actually going to power this stuff going forward.
Scott Levine joined us.
He looks at the energy business for Bloomberg Intelligence. He put together a global team and put out a huge report here, and a really good report on nuclear power twenty twenty six outlook. He's saying, AI driven power demand set to spark three hundred and fifty billion dollar build cycle.
Scott to thanks so much for joining us here. I love the big round numbers here.
Talk to us about from an energy perspective, what the industry's doing to kind of prepare for what seems to be this insatiable demand for power.
Yeah, so nuclear has two very big positives going for it. Number One, it's a emissions free power source, and the hyperscillers that are really behind the investments care about that deeply, right, and so they've favored you know, more renewable sources here too. Four like wind and solar. But what those lack are you know, twenty four by seven base load characteristics and for a data center to be up twenty four to
seven that's not going to do it right. So nuclear checks both of those boxes, and those are two very big positives and the reasons that you're seeing folks like Microsoft and Meta come out in favor of nuclear power.
And yeah, so what's.
The how much does nuclear provide today in the US versus where you think it might be in twenty five years.
Yeah, so today it's a little bit below twenty percent of the grid, OK, which we're saying we'll return to about in our you know, base case scenario twenty percent of the grid by twenty fifty. That may not seem like much two percentage points, right, but it you know, will equate to or amount to a three hundred and fifty billion dollar investment to get there.
So those are big numbers.
And in addition that we're talking about adding sixty some odd gigawatts to the grid, and you can think about each full sized nuke being one gigawatts. That's basically building sixty generating units as our base case.
So those are big numbers to get.
You from eighteen to twenty percent over a twenty five period of time.
I tell you, I went in this report that you and your team put together. Section five, small modular reactors. That's where I wanted to go to because I had think we've had some people come into the studio over the last few years and just talk to us about the science and engineering and the possibilities of these small modular reactors.
Tell us what they are and what role they could play going forward.
Yeah, so really these are and none of these have been built in the US yet, right, So this is very much an emerging technology play. But basically you're talking about is taking a full sized nuke. You're driving on the highway, you see a big coolin tower, a bunch
of smoke coming out the top of it. These are much much smaller, right, and so the idea here would be that these are much more flexible, and so if you have more disparate data centers located throughout the country, you can power these ostensibly with these smaller units.
Right.
And we're talking about you know, some of these are smaller versions of what's already in operation today, which is a light water reactor. And then some of these types of units are different types of technologies. You have gas cooled reactors as opposed to water.
You have molten.
Salt cooled reactors as opposed to water, and these use different types of technologies, different types of fuels still remain to be licensed improven, So a lot of it's are very much on the com But the technology in each of those areas holds promise, so we'll see and each of them has pros and cons right, and so we'll see over the next five years the technology shakeout and see which ones end up being at the top of
the stack for the US. But each of them have a lot of money behind them and a lot of support from a lot of depocketed players.
Talk to us about this Trump administration, what is its view on nuclear fuel as an option?
Okay, so firstly, very positive. They came out with a bunch of executive orders in May where they have clear support. They're trying to streamline the licensing process, so these things. They basically want to see ten reactors in construction by.
Twenty thirty Okay, so.
Yeah, and that's five years from now. It seems like a long time, but in nuclear world where it takes ten even fifteen years to build a reactor, which is what it took to build the only reactor that's been built in the US in the last thirty years took fifteen years to build. That is not that long a period of time.
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